Financial leverage would NOT be increased if a firm financed its next project with:
A) common stock.
B) preferred stock.
C) bonds with embedded call options.
That is all information provided with the question.
Unless the firm is currently UN-leveraged, I don’t think any of the above answer make sense?
Or does anyone have a better explanation than:
The correct answer was A) common stock.
Financial leverage is the result of financing assets with fixed income securities such as bonds or preferred stock. Each of these alternatives has a required payment component that increases the risk of the firm beyond that arising solely from business risk.作者: Carson 时间: 2013-4-17 18:58
Sorry, didn’t know what come in to me.
I saw it asking
Financial leverage would NOT be !!changed!! if a firm financed its next project with:
Haha, but it was increase……
Thx for clear that up.
